The secured creditor or his authorized officer may take
recourse to one or more of the measures provided in sec.13(4) of the Act to
recover his secured debt who has the following options: He may take possession
of the secured assets of the borrower including the rights to transfer by way
of lease, assignment or sale. He may take over the management of the securedassets of the borrower, including the right of transfer of lease, assignment,
sale. He may appoint any person as the manager to manage the secured assets,
the possession of which has been taken over. The
secured creditor may require by notice any person who has acquired any securedassets from the borrower and from
whom any money is due or may become due
to the borrower to pay to the secured creditor so much of the money as is
sufficient to cover the secured debt.
Both in the case of movable and immovable properties, it is
obligatory to serve a notice of thirty days to the borrower about the sale. The
notice of sale shall also be published in two leading widely circulated
newspapers, of which one shall be of the local language. The public notice
shall contain important details of the property, the debt, reserve price, time
and place of public auction, earnest money to be deposited etc. The notice
shall be affixed on the conspicuous part of the immovable property and may also
be put on Website. Sale by any other modes than public auction / tender shall
be on terms settled between the parties. After confirmation and completion of
sale process, the authorized officer shall issue a sale certificate in favour
of the purchaser in the prescribed format.
If the secured assets are movable properties, the authorized
officer shall take the possession in the presence of two witnesses and ensure
that panchanama is drawn and signed by the said two witnesses. The panchanama
shall conform to the prescribed format. After taking possession, the authorized
officer, shall prepare an inventory of the property as per the format prescribed
and shall deliver a copy of such inventory to the borrower or his authorized
agent.
If the property is subject to speedy or natural decay or
expenses for keeping such property is likely to exceed the value of the
property the authorized officer may sell it at once. It is the duty of the
authorized officer to take proper care and take steps for preservation and
protection of the assets. If necessary, the assets may be insured until they
are sold or disposed of.
While taking possession or sale of the secured asset, thesecured creditor may request the help of Chief Metropolitan Magistrate or
District Magistrate in whose jurisdictions the secured assets fall.
Under sec.17 of the Act, the person aggrieved by the actions
of the secured creditor, as provided in sec.13(4) may make an application to
the Debt Recovery Tribunal, having jurisdiction within 45 days from the date on
which action has been taken. Similarly, any person aggrieved by the order made
by DRT under section 17 may prefer an appeal to the Appellate Tribunal within
30 days from the date of the order. The party preferring appeal shall deposit
50% of the amount of debt, with a discretion given to the Appellate Tribunal to
reduce the amount to not less than 25% of the debt.
Transactions not covered
under the Act
The following transactions are excluded from the provisions
of the SRFAESI Act:
a] A lien on any goods, money or security given by or under
the Indian Contract Act, Sale of Goods Act or any other law for the time being
in force;
b] pledge of movables within the meaning of sec.172 of the
Indian Contract Act,
c] any conditional sale, hire purchase or lease or any other
contract in which no security interest has been created;
d] any property not liable to attachment;
e] any security interest created in agricultural land;
f] any security interest for securing repayment of any
financial asset not exceeding rupees one lakh;
g] any case in which the amount due is less than twenty per
cent of the principal amount and interest thereon;
Limitation
The provisions of the Limitation Act 1963 are applicable to
the Act. Therefore, taking possession of the property or appointing a manager
or taking over the management of the securities are to be carried out within
the period stipulated in the Limitation Act, 1963.
The housing loan borrowers may note that if they default in
payment of dues to banks and the loan account becomes NPA, the banks can
initiate action under the SRFAESI Act, issue notice to the borrowers, take
possession of the building and proceed to realize the dues by sale of the
mortgaged property. Therefore, it is
suggested that the housing loan borrowers may repay the housing loan as per
schedule to protect their property.
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